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Annotated Bibliography

Alderman, Harold; Canagarajah, Sudharshan; and Stephen S. Younger, “Consequences of Permanent Lay-off from Civil Service: Results from a Survey of Retrenched Workers in Ghana”, Cornell Food and Nutrition Policy Program Working Paper 35 (February 1993)

Social consequences of a major redeployment program (1987 – 1990) are assessed, including the effect on employment and income of the redeployed.  No political problems ensued, and most retrenched workers found employment quite quickly. A majority of severance payments were spent on savings/investment (56%), while only 44% was spent on immediate consumption. However, for all redeployed workers, average earnings fell by 28% and the household income of the majority of the affected households is lower than that of the general population.

Assaad, Ragui, “Matching Severance Payments with Worker Losses in the Egyptian Public Sector”, World Bank Economic Review Vol. 13, No.1 (January 1999)

In Egypt, only voluntary redundancy programs were feasible because legal limitation precluded layoffs and strong organized labor groups opposed weakening of job security protection. The article estimates the losses that public sector workers would occur if they were displaced and simulates several voluntary severance schemes to determine how well the schemes match compensation payments to these losses. Significant overpayment can be avoided by matching compensation payments to the expected losses of workers. 

Beck, Birgitta Thellman; Johansson, Erik; and David H. Fretwell, “Privatization and Restructuring: Issues Related to Divestiture of Labor and Social Assets”, Draft3, mimeo, World Bank (April 1995)

Economic restructuring often causes displacements of labor, new and different demands for human capital and the primary responsibility for the provision of social services may be shifted from the enterprises, especially in the Formerly Centrally Planned Economies. There is a need to put in place temporary income support and labor redeployment programs to reduce the economic and social impact of restructuring by encouraging private investment and enabling individuals to be self-supporting. The paper is a practical guide to provide ideas and alternatives (including identification of redundancies, compensation and assistance programs) for decision makers who have to deal with problems and consequences of restructuring and privatization of SOEs.

Betcherman, Gordon; Karina Olivas; Amit Dar, “Impacts of Active Labor Market Programs: New Evidence from Evaluations with Particular Attention to Developing and Transition Countries”, Social Protection Discussion Paper Series 0402, World Bank (January 2004)

The paper provides an overview of the effectiveness and impact of various ALMPs. Policymakers should be cautious/realistic regarding what ALMPs can achieve. A wide range of results can be found with some programs demonstrating positive effects for participants and others showing either no or even negative effects. Program design and the context in which programs operate matter a great deal.

Cruz, Wilfred; “Addressing Labor Concerns during Privatization: Lessons from the Metropolitan Waterworks and Sewerage System (MWSS), Manila, Philippines”, Public-Private Infrastructure Advisory Facility (July 2001)

A case study describing the approaches to labor issues addressed during the privatization in the Philippines of the Metropolitan Waterworks and Sewerage System (MWSS), a public water utility. The process of work force reduction is described in detail as well as the measures applied. Protective legislation led to a restructuring process predominantly based on voluntary early retirement and separation by the government prior to privatization as well as by the private owners afterwards. 

Diwan, Ishac; Anat Levy; and Martín Rama, “Public Sector Retrenchment and Efficient Compensation Schemes: A Research Proposal”, World Bank (April 1994)

The report focuses on the scope of retrenchment, the speed of implementation and on the design mechanisms of retrenchment programs, including targeting and the size of compensation. Several compensation schemes for voluntary separation are considered. The design of compensation schemes is complex because of inflexibilities related to legal, social and political constraints.

Estache, Antonio; Jose Antonio Schmitt de Azevedo; Evelyn Sydenstricker, “Labor Redundancy, Retraining, and Outplacement during Privatization: The Experience of Brazil's Federal Railway”, Policy Research Working Paper 2460, World Bank (October 2000)

A detailed case study of the labor program used in support of restructuring and privatization of Brazil's Federal Railway. They discuss the design of the labor redundancy program, highlight the connections between its components, and assess the program’s achievements. The main problem came from the underestimation of time needed to agree on the strategy for implementing the training and outplacement programs. Most workers found new jobs before many of the training programs were available.

Fiszbein, Ariel, “Labor Entrenchment and Redundancy Compensation in State Owned Enterprises: The Case of Sri Lanka”, South Asia Region Internal Discussion Paper, World Bank (December 1992)

The paper provides a framework to analyze alternative strategies and solutions for labor retrenchment and redundancy compensation in Sri Lanka, and discusses the retrenchment strategy and estimates the extent of labor redundancy in SOEs (high at 40 to 50%). Principles are proposed which should guide the design of compensation schemes.  The lack of a clear legal framework to determine the payment of redundancy compensation and the past use of several alternative packages generated uncertainty about the cost of the labor retrenchment program.

Fretwell, David H.; Lovell, Malcolm; and Robert w. Bednarzik, “Employment Dimensions of Economic Restructuring: A Review of Related Labor Policies and Programs in Industrialized Countries”, World Bank (April 30, 1991)

The paper provides a synopsis of broad work force strategies and policies related to the worker adjustment process and a comprehensive review of employment programs offering reactive measures (to ameliorate short-term costs through income support) and proactive measures (which seek to add value to human capital, thereby facilitating redeployment of labor) in OECD countries, with a primary emphasis on CEE. No single action is likely to be effective in isolation: effective programs combine reactive and proactive measures.

Fretwell, David H., “Mitigating the Social Impact of Privatization and Enterprise Restructuring,” Social Protection Discussion Paper Series No. 0405, World Bank (March 2004)

This paper summarizes practical findings from experience with labor programs world wide – Latin America and Europe in particular. It assesses the objectives of social support programs, pre- and post-layoff services, income support programs, labor redeployment services, and the evaluation and monitoring of labor programs. The paper is intended to serve as a checklist by Bank staff and borrowers during the design of social mitigation programs.

Galenson, Alice, “Labor Redundancy in the Transport Sector: A Review”, Infrastructure and Urban Development Department Discussion Paper Report INU 36, World Bank (January 1989)

The report presents an overview of labor redundancies in the transport sector: its magnitude, roots, consequences, solutions, issues surrounding identification. The report provides a detailed and relevant account of the whole process of labor redundancy that is applicable outside the transport sector as well.

Haltiwanger, John, and Manisha Singh, “Cross-Country Evidence on Public Sector Retrenchment”, World Bank Economic Review, Vol. 13, No. 1 (January 1999)

The article reports the results from a survey of public sector employment retrenchment episodes across a wide variety of developing and transition economies. The article analyzes the relationships between the factors leading to retrenchment, the scope and nature of retrenchment, the methods used to accomplish retrenchment, and attempts to evaluate the outcome of the programs. Optimal incentive schemes must be individually tailored to reflect worker heterogeneity in rents and adjustment costs. Targeting of separation significantly reduces the probability of adverse selection and subsequent rehiring.

Hanna, Nagy; “Implementation Challenges and Promising Approaches for the Comprehensive Development Framework”, World Bank Operations Evaluation Department Working Paper Series No. 13 (2000)

The paper identifies key challenges and tensions that are likely to arise in the implementation of the Comprehensive Development Framework (CDF) and outlines promising approaches for addressing them. Although the document does not directly refer to the process of labor restructuring, many of its applications and lessons can be applied in the context of labor restructuring in the public sector in terms of the approach, design and implementation of these programs.

Havlicek, Dieter, “Experience with Labor Redundancy Schemes in the Transport Sector in Western Europe, the United States and Japan”, Infrastructure and Urban Development Department Discussion Paper Report INU 9, World Bank (April 1988)

The paper provides a review of labor redundancy experiences in terms of the magnitude of the problem, its causes, how the entities concerned (as well as workers and governments) coped with the problem, the effectiveness of the different adopted solutions and what measures were taken to deal with the problem more effectively in the future. The study identifies the factors most likely to contribute to the successful or unsuccessful outcome of labor redundancies.

Kikeri, Sunita, “Privatization and Labor: What Happens to Workers When Governments Divest?”, World Bank Technical Paper No.396 (February 1998)

The paper examines the relationship between privatization and labor. In cases where efficiency improvements require large scale labor force adjustments, privatization can proceed smoothly if governments take early steps to inform and involve labor unions and workers in the reform process, develop a menu of restructuring options, help workers on targeted basis to reintegrate into the labor market, and to eliminate obstacles to private job creation. The choice of measures depends on country and enterprise circumstances.

Lopéz-Calva, Luis F., “Private Participation in Infrastructure and Labor Issues: The Privatization of Mexican Railroads”, Public-Private Infrastructure Advisory Facility (November 2001)

The case study describes how labor restructuring was approached and implemented. Making the company attractive to investors, while respecting labor rights and reducing labor redundancy, was the main challenge for the privatization team. When the privatization process started in 1996, FNM had around 43,000 active workers. In 1998, 7% of that labor force (3,000) had opted for retirement, 54% (23,300) had been re-hired by the new companies, and 39% (16,700) ended their relation with the company. The various packages offered to workers are described.

Mills, Bradford, and David E. Sahn, “Is There Life After Public Service: The Fate of Retrenched Workers in Conakry Guinea”, Food and Nutrition Policy Program, Cornell University (April, 1993)

The paper focuses on Guinea’s retrenchment experience and impact on retrenched workers and households, in an environment of public sector dominance of economic activity and severe institutional constraints to effective program implementation. Compensation was the main assistance program while other redeployment sources were hardly used my retrenched workers. Overall 65% of retrenched public sector workers, who found another position, re-enter the wage sector, with 35% undertaking self-employment. The earnings for these people were over twice their level in the public sector, although 52% of the self-employed had lower real earning. Individuals leaving due to redeployment and retirement were vulnerable (with often long duration of unemployment) with 35.1% and 43.9% falling into the lower 30% of per capita distribution.

Mills, Bradford; Sahn, David E.; Walden, W.W.; and Stephen D. Younger, “Public Finance and Public Employment: An Analysis of Public Sector Retrenchment Programs in Ghana and Guinea”, Food and Nutrition Policy Program Cornell University (May 21, 1993)

The design, implementation and outcomes of civil service reform are described with the goal to explain political, economic and social consequences of the reforms. Most workers found employment quite quickly following retrenchment, often as self-employed and in the informal sector.  Redeployment assistance was not popular.  Incomes following retrenchment were modestly lower than while they had been public sector employees.

Nunberg, Barbara; “Rethinking Civil Service Reform”, PREM Note 31, World Bank (October 1999)

Civil service reform often does not generate sustainable improvements in government performance. A rethinking of the Bank’s approach could lead to broader interventions better tailored to country conditions and demand. The note reviews the reasons why the traditional civil service reform has not been as effective and efficient, and introduces elements of a new approach to civil service reform.

Rajnes, David M., “Civil Service Retirement Schemes: A Global Survey”, draft report submitted to the World Bank (December 1996)

The document provides an overview and comparison of civil service retirement schemes around the world in a total of 53 countries. Pension systems present financial pressures through often overly generous civil service pension schemes. Cost-cutting measures may include higher retirement ages and/or longer service periods, tightening of early retirement provisions, higher contribution rates, and implementation of defined contribution plans or privatization of pension schemes. The document does not directly provide insight in the retrenchment design challenges, but can indicate issues that might need to be resolved in times of retrenchment.

Rama, Martin, “Public Sector Downsizing: an Introduction”, World Bank Economic Review Vol. 13, No.1 (January 1999)

The article attempt to sketch a protocol for public sector downsizing that takes into account the costs and benefits for the workers and the economy. Five questions are addressed: (i) how to identify redundant workers; (ii) how to predict their losses from separation; (iii) how to design compensation and assistance packages; (iv) how to assess the financial and economic returns to downsizing; (v) how to deal with downsizing in one-company towns. Because large-scale involuntary dismissals are often politically difficult, a voluntary approach is increasingly popular.

Rama, Martin, and Donna MacIsaac, “Earnings and Welfare after Downsizing: Central Bank Employees in Ecuador”, World Bank Economic Review Vol. 13, No.1 (January 1999)

This article measures the earnings and welfare losses experienced by displaced employees of the Central Bank of Ecuador. Compensation for displaced workers was based on a rule of thumb that involved salary and seniority and was applied across the board. Overall the losses were larger for employees with less education and more seniority, but not necessarily for employees with higher salaries. For employees who left voluntarily, the resulting compensation package was, on average, about 20 percent higher than the welfare losses.

Ray, Pranabesh, “HR Issues in Private Participation in Infrastructure: A Case Study of Orissa Power Reforms”, Public-Private Infrastructure Advisory Facility (July 2001)

The case study discusses the process that was applied to deal with workers throughout the power reforms. Legislation, pensions, staff rationalization, voluntary retirements, financing, consultations with trade unions, and communications are discussed in detail within this context. Due to restrictive labor legislation and the absence of any social security system, labor rationalization was realized through attrition and voluntary retirement schemes.

Razzaz, Susan; “Minimizing Negative Distributional Effects of Public Sector Downsizing”, PREM Notes 84, World Bank (April 2004)

This note examines the differing possible impacts of downsizing on male and female employees and the consequences for households and the economy at large. Experience shows that in most cases women suffer greater losses in both income and non-monetary benefits. A tool is introduced that can be used in the design of downsizing programs to minimize negative distributional consequences.

Reid, Gary J., “Civil Service Reform in Latin America: Lessons from Experience,” LATPS Occasional Paper No. 6, World Bank (May 1, 1992). (only available internally to staff)

The paper analyses Chile’s employment reduction efforts over the 1974-90 period and identifies lessons regarding the design and implementation of similar efforts in other countries. Chile reduced it total public employment by more than 57%, and the reforms appear to be an exemplar of how to retrench, restructure public employment and sequence public wage restructuring.                      

Robbins, Donald J.; González Rozada, Martín; and Alicia Menéndez, “Public Sector Retrenchment and Efficient Severance Payment Schemes: A Case Study of Argentina,” draft, Harvard University and Boston University (October 30, 1996).

The paper examines Argentina’s voluntary retirement program of massive employment restructuring to learn about the optimal level and structure of severance pay packages. Similar estimates can be used to determine the appropriate level and potential structure of severance pay packages for other countries. The study analyses leaver-stayer data, and what happens to workers accepting voluntary separation. Examining the pattern of employment for a sample of leavers shows lower re-employment probabilities for older workers and females.

Ruppert, Elizabeth, “The Algerian Retrenchment System: A Financial and Economic Evaluation”, World Bank Economic Review Vol. 13, No.1 (January 1999)

The government of Algeria adopted a new retrenchment system to facilitate labor shedding in a public sector characterized by redundant workers and in an environment of already high unemployment. The article assesses the financial viability of the retrenchment system and the inherent welfare costs and benefits associated with layoffs.

Sherif, Khaled; Clarke, George; and Simeon Djankov, “Using Severance to Facilitate Liquidation: How the World Bank Can Help”, mimeo, World Bank

The paper discusses how severance payments might be used to reduce political opposition to liquidation and to protect workers. Particular attention is paid to the identification of appropriate candidates for liquidation and the design of severance package for displaced workers from these firms.

Svejnar, Jan and Katherine Terrell, “Labor Redundancy in the Transport Sector: The Case of Chile”, mimeo, World Bank (July 3, 1990)

The paper describes the approach followed in the Chilean transport sector reforms where over a relatively short time (shock policy) employment was drastically reduced. The factors that gave rise to labor redundancy and the policies that were used to eliminate it are examined. Individual labor redundancy schemes are evaluated. Within a short period of time the benefits of the various schemes outweighed the costs. The major benefit (reduction in labor costs) was recurrent while he major cost (severance) was non-recurrent.

Svejnar, Jan and Katherine Terrell, “Labor Redundancy in the Transport Sector: The Case of Brazil”, mimeo, World Bank (July 27, 1990)

The paper describes the approach followed in the Brazilian transport sector reforms where a gradual, though steady, approach to reduction of excess employment was applied. Overall, the employment history of the railways constitutes a fascinating story of a gradual reduction of employment from an initial situation of considerable access employment to a state with severe shortages n certain skill categories.

Svejnar, Jan, and Katherine Terrell, “Labor Redundancy in State Owned Transportation Enterprises: Determinants and Solutions”, mimeo, World Bank (July 30, 1991)

The paper focuses on determinants and solutions to labor redundancy in selected modes of transport (rails, ports and buses) based on case studies in Brazil, Chile, Ghana, Mauritius, Sri Lanka and Yugoslavia. The study presents a framework for identifying the extent of the labor redundancy, and provides considerations that should be taken into account in designing and implementing labor redundancy policies, programs and compensation packages.

Tanahashi, Yasushi, “Reform of Railways in Japan”, Infrastructure and Urban Development Department, World Bank (September 1991) (only available internally to staff)

The paper reviews the outlines of the plan for privatization and restructuring of JNR and discusses how redundant labor was dealt within a restrictive legislative framework concerning retrenchment.

Valdez, Jose; “Case Studies on Human Resources in Private Participation in Infrastructure: Railroads in Bolivia”, Public-Private Infrastructure Advisory Facility (July 2002)

A Case Study, which reviews the implementation of labor policies during the capitalization of the Bolivian Railway (ENFE). Given the difficult economic situation of ENFE, and in order to assure the presence of bidders, the government had to downsize substantially the work force. This paper presents the approach applied and the main outcomes of this process. An interesting feature is that a large portion of the reduction in employment was mitigated by increased outsourcing of non-core services.

Wilhelm, Vera; and Inna Kushnarova, “The Public Sector Governance Reform Cycle: Available Diagnostic Tools”,  PREM Note 88, World Bank (July 2004)

The note proposes a dynamic framework (the Public Sector Governance Reform Cycle) to help identify tools that may be useful in public sector reform work. These tools help users better understand the nature and sources of governance problems and capacity constraints, and develop strategies to address them. Although not directly addressed in the note, many of these tools can be of help in designing, implementing and monitoring/evaluating labor restructuring programs.

World Bank Development Communication Division, “Public Communication Programs for Privatization Projects: A Toolkit for World Bank Task Team Leaders and Clients”, World Bank (2002)

The toolkit reviews experience of the World Bank and other international institutions with employing strategic communication programs. It highlights some of the best practices and identifies lessons learned from mistakes. It sets out a phased approach for managing and implementing communication campaign. Communication plays a critical role and should be an essential component of the overall reform program. A public communication program helps avert failure by building support and diminishing opposition. The publication provides a useful tool that will facilitate targeting the reform and reduce opposition.

World Bank & Public-Private Infrastructure Advisory Facility, “Labor Issues in Infrastructure Reform: A Toolkit”, (2004)

The primary objective of the toolkit is to provide practical tools and information to help policy makers handle labor issues in infrastructure reform. Drawing from available information, practical experiences, and global best practices, the toolkit provides a practical guide to assist in designing, implementing and monitoring labor programs. Experience shows that no one strategy is universally applicable and that choice of measures depends on country and enterprise circumstances. The toolkit provides a range of practical tools and reference materials.

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